July 13, 2022
July 13, 2022
From the Bay State to the Golden State, lawmakers across the nation are making deals and negotiating budgets with major tax implications. In Massachusetts, leaders announced recently that they had agreed to a framework for a tax bill that would not only provide one-time rebate checks, but also increase several credits, including the Earned Income Tax Credit and child and dependent credit. The plan also, unfortunately, provides a boon to the state’s wealthiest by increasing the estate tax threshold from $1 million to $2 million. In Pennsylvania, a budget agreement was reached and includes a sizable reduction in the state corporate income tax and one-time direct property tax credits. Meanwhile, further west, California’s final budget will bring with it payments aimed toward relieving some of the impacts of inflation and lower cannabis taxes, in addition to the slew of tax-related ballot measures that voters will get to decide on in November. And finally, lawmakers in Alaska and North Carolina can celebrate after their budgets were passed and signed, while Michigan and Missouri lawmakers will continue to deliberate as they’ve had to deal with impasses and governor vetoes.
Major State Tax Proposals and Developments
- PENNSYLVANIA legislators settled on a budget plan that will lower the state’s corporate net income tax rate from 9.99 percent to 4.99 percent by 2031. This is projected to cost millions in just the next two years even though the impact of reduced corporate tax rates on job growth is negligible. The budget also increases the cap on the state’s film production tax credit program from $70 million to $100 million plus another $5 million for “Pennsylvania film producers”. In terms of tax credits, the budget adds $140 million in one-time direct property tax credits for seniors and people with disabilities and $25 million for a state childcare tax credit equal to 30 percent of the federal credit. – KAMOLIKA DAS
- In a monumental win for NEW JERSEY families, Gov. Phil Murphy recently signed legislation creating a state child tax credit program that will provide $500 for each child under age six if they earn $30,000 or less and smaller amounts for families earning up to $80,000. – KAMOLIKA DAS
- The final budget deal in CALIFORNIA included inflation relief payments of up to $1,050 as expected. Lawmakers also reduced cannabis taxes, though some in the industry argue the cuts are insufficient. And several tax-related initiatives will end up on state and local ballots in November, including the possibility of legalizing and taxing sports betting (at 10 percent), an effort to raise taxes on multi-millionaires to fund climate change mitigation and wildfire prevention, a vacant properties tax to improve housing affordability in San Francisco, and a tax on mansion sales to fund homelessness mitigation in Los Angeles. – DYLAN GRUNDMAN O’NEILL
- MASSACHUSETTS lawmakers announced that they would be sending Gov. Charlie Baker a tax proposal that would include one-time rebate checks for those filed 2021 returns and earned over $38,000 but no more than $100,000 for single filers and $150,000 for joint filers. Other changes included in the framework are boosts to the senior circuit breaker credit, Earned Income Tax Credit, child and dependent tax credit, and renter deduction. The bill also increases the estate tax threshold from $1 million to $2 million. – MARCO GUZMAN
- ARKANSAS Gov. Asa Hutchinson plans to call a special session to cut income taxes, despite slashing personal and corporate income taxes late last year. Republican leadership have signaled consensus around proposals to accelerate the cuts to the corporate and personal income tax rates that passed in 2021.
- CONNECTICUT will be implementing a new requirement that gubernatorial budget proposals must include estimates of how they will affect racial and socio-economic inequities.
- A new law in MAINE that will freeze property tax increases for permanent residents aged 65 and older will go into effect August 8.
- Despite passing a budget, lawmakers in MICHIGAN are still at an impasse on a tax cut plan after multiple proposals were vetoed by Gov. Gretchen Whitmer.
- MISSOURI Gov. Mike Parsons has vetoed a $500 million rebate plan and has instead called for a special session focusing on permanent tax cuts.
- A proposed constitutional amendment in MONTANA that would have placed a strict cap on property taxes will not appear on the ballot after failing to gain enough signatures.
- A Republican gubernatorial candidate out of NEW MEXICO has proposed $100 annual tax rebates for all residents–including children.
- Protesters in NEW YORK launched an “Occupy the Hamptons” effort to call for higher taxes on wealthy individuals and more commitment to fighting climate change.
- In OKLAHOMA, Governor Kevin Stitt signed a bill that would effectively allow businesses to write off their business investments through full expensing. They’re the first state to do so.
- The TEXAS budget is anticipated to be flush with cash as the legislature enters the 88th session next January. Some lawmakers are already calling to use the surplus for property tax cuts.
- WEST VIRGINIA legislators will be called into a special session on tax cuts at the end of the month. Gov. Jim Justice is pushing a plan to cut the state’s income tax rate by 10 percent which would reduce state revenues by $254 million annually. Some senators are pushing for a rebate on vehicle property taxes instead. This aligns with a November ballot initiative that would authorize state lawmakers to eliminate personal property taxes paid on business inventory, business machinery and equipment, and personal vehicles. If these property taxes were fully eliminated, counties would lose about $515 million annually for public schools and local government services.
What We’re Reading
- Ian Berlin and William G. Gale of the Brookings Institute argue that fears of reduced labor force participation if the child tax credit expansion became permanent are weak, and that the benefits of reducing child poverty should far outweigh any concerns.
- Mississippi State Minority Leader Derrick Simmons writes about the state’s regressive move to a flat tax and how this will deepen inequities and compromise Mississippi’s ability to invest in public services.
- Allegheny College Professor Joe Tompkins explains why Pennsylvania’s corporate net income tax cut is not likely to generate job growth. When factoring in the $6 billion in lost revenues from the corporate tax cuts over the next decade, each new job will cost the state almost $270,000.
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